LexOrbis

Delhi High Court’s Landmark Ruling Upholds SEP Owners’ Rights and Provides Clear Guidance on Licensing

On 29th March 2023, the Delhi High Court’s Division Bench issued a landmark judgment in two cross-appeals between Telefonaktiebolaget LM Ericsson (“Ericsson”) and M/s Intex Technologies Ltd (“Intex”) regarding Standard Essential Patents (SEPs) and Fair, Reasonable, and Non-Discriminatory (FRAND) terms. The court’s ruling established essential principles for Indian courts to follow in similar cases. While confirming the Single Judge’s decision in CS(OS) No.1045/2014, the court also instructed Intex to pay the full royalty amount owed to Ericsson within four weeks.

Brief Facts of the Case

The cross-appeals were filed to challenge the Ld. Single Judge’s order dated 13th March 2015, commonly referred to as the ‘impugned order,’ in CS(OS) No.1045/2014. Intex filed an appeal against the impugned order, where the Ld. Single Judge ruled that Intex had prima facie infringed Ericsson’s patents, and Ericsson’s eight patents were prima facie valid and essential. The impugned order also found that Ericsson had complied with its FRAND commitments, while Intex had demonstrated an unwillingness to execute a FRAND license by prolonging pre-suit negotiations and initiating proceedings against Ericsson before the Competition Commission of India (CCI) and Intellectual Property Appellate Board (IPAB) during the licensing negotiations. Additionally, the Ld. Single Judge ruled that the end-device price’s royalty calculation practice was non-discriminatory, and the chipset basis for calculating royalty could not be accepted. Ericsson filed an appeal requesting that Intex be directed to pay the entire royalty amount instead of paying 50% royalty at the interim stage and the balance 50% through a bank guarantee, as ordered by the Ld. Single Judge in the impugned order dated 13th March 2015 and subsequent modification order dated 26th Mar 2015.

Court’s Analysis and Findings on SEP Licensing/Litigation

  1. The Importance of Standards in a Modern Economy
    • The Delhi High Court recognized the importance of standards in promoting innovation, increasing the quality and viability of products, providing jobs and growth, and supporting the global value chain.
    • Standard Development Organizations (SDOs) coordinate the development of standards, ensuring that the latest state-of-the-art technology is available to implementers worldwide and that patent owners are adequately rewarded at FRAND rates for their contribution/innovation.
  2. Obligations of SEP Holders and Implementers
    • SEP holders are required to disclose relevant patents as being SEPs and make them available to all willing users. They should avoid “hold up” situations and offer licenses to all willing licensees on FRAND terms.
    • Implementers need to avoid “hold out” situations and cannot remain silent during negotiations. They must either accept the SEP holder’s offer or give a counteroffer along with appropriate security to prove that they are willing licensees.
  3. Recognition of SEPs in Indian Law
    • While SEPs are not specifically referenced in the Patents Act, 1970, various court decisions have recognized their importance.
    • The Delhi High Court’s Rules Governing Patent Suits 2022 have formally recognized Standard Essential Patents and the different legal tests involved in their adjudication.
  4. Injunctive Relief Against Unwilling Licensee
    • SEP owners can seek interim and final injunctive relief against an “unwilling licensee” who engages in “hold out” behaviour.
    • There is no prohibition in Indian law against a SEP owner from seeking an injunction.
  5. Test of Infringement in SEP Matters
    • The Court opined that the “indirect” test method is a better way of proving SEP infringement and essentiality.
    • The “indirect” method includes mapping the SEP to the standard and showing that the implementer’s device also maps to the standard.
  6. Injunction May Be Granted Even If Prima Facie Infringement Established
    • An injunction can be granted even if the infringement of one patent is established prima facie or at the final stage. Infringement of even one patent can bar the sale of the implementer’s product.
    • SEP owners can sue implementers by showing that one or a handful of representative patents are infringed, and an evaluation of these patents can determine FRAND terms for the entire portfolio.
  7. SEP Owners Can Offer a Portfolio License
    • The Court opined that global portfolio licenses are capable of being FRAND, and SEP owners can offer them instead of individual patent licenses or country-specific licenses.
  8. Final Decision on Essentiality and Validity Not Required for Preliminary Injunction
    • The Court opined that the four-fold test in Nokia Vs. Oppo places an onerous burden on SEP owners at the interim stage and is contrary to Indian law and does not apply in normal patent suits.
    • An interim order, like a temporary injunction or conditional order of deposit, cannot be ascertained in SEP suits if such a high burden is applied.
  9. Admission of Essentiality and Infringement if Alleged Abuse of Dominant Position
    • If an implementer alleges that a SEP owner is abusing its dominant position by holding SEPs, the perusal of a complaint before another forum is prima facie an admission that the patents are essential and infringed.
    • If the implementer believes that it is not infringing the SEP owner’s patents, it should seek a declaration of non-infringement or groundless threat under Sections 105 and 106 of the Act.
  10. Presumption of patent invalidity cannot be based solely on a pending revocation petition.
    • The Delhi High Court clarified that the mere filing of a revocation petition against a patent does not create a presumption of the patent’s invalidity. To question the validity of a granted patent, a credible challenge must be raised, and it cannot be solely based on the ground that a revocation petition is pending.
    • The timing of the revocation petition is also crucial, as the delay in filing the petition while being on notice by the SEP owner for a long time shows the non-seriousness and inability to raise a credible challenge to the validity of the patent in question.

Court’s Decision

The Court’s decision, in this case, was in favour of Ericsson, the owner of the Standard Essential Patents (SEPs), and against Intex, a company that was found to be an intentional unwilling licensee of Ericsson’s SEPs. The Court found that Intex had failed to raise a credible challenge to the validity of the suit patents and that Ericsson’s patents were essential and had been infringed. The royalty sought by Ericsson was found to be on FRAND (Fair, Reasonable, and Non-Discriminatory) terms. Additionally, the Court directed Intex to pay in full for the past use of the SEPs.

Conclusion

The Court’s decision is significant as it addresses several relevant issues in litigation and licensing of SEPs and attempts to harmonize existing decisions from leading foreign jurisdictions. The decision is seen as a practical tool to facilitate the harmonization of basic principles of laws, especially when there is nothing contrary to the national laws. The judgment is expected to enhance the confidence of SEP owners in India, thereby fostering innovation and ensuring that the latest state-of-the-art technology is available to the Indian market.